CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS

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1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS A. General description of the small scale project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the proposed small scale project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring Information 1

2 Revision history of this document Version Date Description and reason of revision Number January 2003 Initial adoption 02 8 July 2005 The Board agreed to revise the CDM SSC PDD to reflect guidance and clarifications provided by the Board since version 01 of this document. As a consequence, the guidelines for completing CDM SSC PDD have been revised accordingly to version 2. The latest version can be found at < December The Board agreed to revise the CDM project design 2006 document for small-scale activities (CDM-SSC-PDD), taking into account CDM-PDD and CDM-NM. 2

3 SECTION A. General description of small-scale project activity A.1 Title of the small-scale project activity: Composting project activity for biomass residues derived from Palm Oil Mill Version: 1.2 Date: 18/03/2011 A.2. Description of the small-scale project activity: Purpose of the project activity: The proposed project activity developed by the Kilang Kelapa Sawit Fortuna Sdn. Bhd. (hereafter PP ), includes co-composting of biomass residues derived from a palm oil mill in Malaysia at the location mentioned in Section A The purpose of the project activity is to avoid methane emissions from anaerobic decomposition of organic waste and wastewater through controlled aerobic decomposition. In addition, by product of aerated co-composting will result in compost, which can be utilized as soil conditioner in the palm oil plantation. Baseline scenario: Various types of solid and liquid waste are generated from the Palm oil mill, namely empty fruit bunches (EFB), fibers, palm kernel shells (PKS) and liquid effluent with high COD content known as palm oil mill effluent (POME) and POME slurry. The project under discussion is proposed by Kilang Kelapa Sawit Fortuna Sdn. Bhd. in its 45 TPH capacity palm oil mill located in Malaysia. In baseline scenario POME (which includes POME slurry) were being treated in series of anaerobic & aerobic open lagoons 1. The treated wastewater was finally discharged to water ways. The treated wastewater would comply with the existing regulations for effluent discharge i.e., a maximum 20 mg BOD/liter 2. EFB would be dumped in open solid waste disposal sites situated in the plantation estate belonging to the project proponent near to the palm oil mill. Decomposition of POME and EFB disposal in anaerobic conditions would result in methane emissions into the atmosphere. Project scenario: In the project scenario, waste residues i.e., EFB, POME and POME slurry will be co- composted. The two phase decanter technology 3, which is imported from Germany, is used to separate oil, water and solid contents in the crude palm oil stream. Thus, it separates the POME slurry from POME. The compost produced is used as fertilizer in palm plantation of project proponent. There is minimal power consumption in co-composting process, which will be imported from the existing biomass based power plant. In the project activity, PP is co-composting the solid biomass (EFB) with the wastewater from the palm oil mill (POME and POME slurry) in compost pits. However, PP is claiming emission reductions for methane avoidance through wastewater (which includes POME and POME slurry) 1 Please refer Annex 3 for details of existing pond. 2 Environmental Quality Act 1974 (Act 127), 20th July 2006 Regulations of Environmental Quality (Prescribed Premises) (Crude Palm Oil) P.U.(A) 342/ PP uses a two-phase decanter technology in which crude palm oil is split in the two phases and sludge, right after a thermo-screw pressing process. In general, decanter systems generate less POME, estimated at 0.45 times the quantity of FFB (Fresh Fruit Bunches) processed in the mill. Reference: Technology supplier offer letter. 3

4 treatment only and not for EFB disposed off at the solid waste disposal site in the plantations owned by the PP. Table 1: Summary of Baseline and project scenario Waste Type Baseline scenario Project scenario EFB 4 Disposal at solid waste disposal dumpsites owned by the PP Aerobic Composting - to be applied in the plantation as organic fertilizer displacing chemical fertilizers POME Series of anaerobic and aerobic open lagoons Aerobic process where POME is sprayed on a large fibrous surface area of EFB during composting POME slurry Series of anaerobic and aerobic open lagoons Aerobic process- where POME slurry is mixed with EFB and POME during composting Contribution to the sustainable development of the host country: Proposed project activity contributes positively to the sustainable development of the host country s National Criteria defined by Designated National Authority 5. Criterion 1 - The project must support the sustainable development policies of Malaysia and bring direct benefits towards achieving sustainable development: Social & Economic: The project activity contributes significantly to the socioeconomic development by generating permanent and temporary employment opportunities during construction and operation phase. The project activity is located in a remote village. Therefore the local job opportunities might also help in reducing the rural-tourban migration to some extent. Environmental: The proposed project activity intends to apply integrated waste treatment system that will prevent methane emission from the EFB disposal in unmanaged dumpsites and the POME treatment in anaerobic open lagoons in the pre-project scenario. Also, odour problem in the existing open lagoon treatment system will be reduced. In addition, the end product i.e., compost would be used in palm plantation, reducing consumption of chemical fertilizers. Technological: Proposed project activity transfers know-how by applying the imported equipments for co-composting. The project implementation will set an example for other similar business houses to come up with similar projects. The project might also encourage technology suppliers and manufactures to put in more efforts/funds for further improvement of equipment/machinery and help in removing existing technological barriers in such projects. The successful execution and implementation of the project activity might encourage the investment in other cleaner technologies as well. Criterion 2 - Project implementation must involve participation of Annex I Party/Parties as CER buyer The project implementation involves participation of Annex 1 party as CER buyer. A letter from an interested CER buyer shall be provided to the DOE during validation. 4 PP will not claim emission reductions for methane avoidance from EFB consumption for co- composting. 5 Malaysia Handbook for Clean Development Mechanism, Pusat Tenaga Malaysia. Available at: 4

5 Criterion 3 - Project must provide technology transfer benefits and/or improvement in technology: In the proposed project activity, windrow turner is imported from Germany. The imported technology will improve local know how contributing to the technology transfer benefits. Criterion 4 - Project must fulfil all conditions underlined by the CDM Executive Board: i. Voluntary Participation: Project promoter s participation is voluntary. ii. Real, measurable and long term benefits related to mitigation of climate change; Please refer section A.4.3 and Section B.6 for details. iii. Reductions in emissions that are additional to any that would occur in the absence of the certified project activity: Please refer section B.5 for details. Criterion 5 - Project proponent should justify the ability to implement the proposed CDM project activity: The project promoter, Kilang Kelapa Sawit Fortuna Sdn. Bhd. is a local company with paid-up capital of more than RM 100,000. Kilang Kelapa Sawit Fortuna Sdn. Bhd. will be financing the project using internal equity. A.3. Project participants: Name of Party involved (*) ((host) indicates a host Party) Malaysia (Host) Private and/or public entity(ies) Project participants (*) (as applicable) Kilang Kelapa Sawit Fortuna Sdn. Bhd. (Private Entity) Kindly indicate if the party involved wishes to be considered as project participant (yes/no) No A.4. Technical description of the small-scale project activity: A.4.1. Location of the small-scale project activity: A Host Party(ies): Malaysia A Region/State/Province etc.: Sabah A City/Town/Community etc: Ulu Tungud, Labuk Sugut, 5

6 Beluran Sabah A Details of physical location, including information allowing the unique identification of this small-scale project activity : The project site is located at village Daerah Beluran. The closest airport is 150 km away at Sandakan. The project activity is situated at North latitude and East Longitude. The physical location of plant site is depicted in the maps below: Project activity location Physical Address of site: Kilang Kelapa Sawit Fortuna Sdn. Bhd. Ulu Tungud, Labuk Sugut, Beluran Sabah, Malaysia A.4.2. Type and category(ies) and technology/measure of the small-scale project activity: According to the Appendix B of the simplified modalities and procedures for small-scale CDM project activities, the project is a small scale CDM project activity and conforms to the following category - Project Type Project Category Version Sectoral Scope III. Other Project III.F. Avoidance of methane Version Activities emissions through controlled biological treatment of biomass Technology measure: The project activity will change the existing conventional waste treatment of EFB and POME, POME Slurry in Palm oil mill. POME and POME Slurry is treated in a series of anaerobic and aerobic open lagoons before discharged to water ways. The figure given below depicts process applied for treatment of POME, POME Slurry and EFB in the baseline scenario. 6

7 POME Slurry POME Cooling Pond Series of anaerobic and aerobic open lagoons Water ways Irrigation EFB Solid Waste disposal sites EFB and POME including slurry treatment in baseline scenario Co- Composting process: Composting is an aerobic process of degradation of organic matter into simpler substances aided by micro-organisms in the presence of oxygen. The effectiveness of the composting process is influenced by the environmental conditions present within the waste viz. temperature, moisture, organic matter content of waste, presence of oxygen and the size and activity of microbial populations. In the project activity, Co-composting system utilizes EFB, POME slurry and POME. The EFB is approximately 22% 6 of FFB processed by weight. A 2-phase decanter system reduces the volume of waste water as a result of which the POME generated is approximately 0.45 m 3 per tonne 7 of FFB processed. EFBs are shredded using a high speed hammer mill and then stacked into windrows of 1.5 meter high by 100 meter length in a confined composting site. POME slurry is spread/sprayed over the windrow using a truck-tipper and the compost heap is turned using a windrow turner. POME is pumped from the second anaerobic pond (60 m wide and 5.5 m deep) and sprayed on these windrows periodically to convert these waste matters into organic fertilizer. The windrows are turned regularly using a windrow-turner for better mixing, aeration and temperature control. The compost is mature after approximately 8 weeks and ready for use. The leachate is collected in internal perimeter leachate trenches and transferred to the leachate pit. From the leachate pit, it is recycled back to the compost heaps, resulting in avoidance of leachate leakage from the composting area. Technical details of the project activity: The project activity includes two main technologies; the shredding machine and the compost turner. The shredder machine will be used to press and shred the EFB into smaller bits, which increases its surface area for faster decomposition. The turning machine will turn the compost to provide oxygen to the compost while mixing it, making the process aerobic while restoring the porosity of the compost pile. In addition to that, turning also has a pasteurization effect which exposes the weed seeds, pathogens and 6 Values range from 22-24% as documented at Environmental Management for POM, A.H-Kittikun, P.Prasertan, G. Srisuwan and A. Krause. A value of 22% was selected to be conservative. 7 As specified by the technology provider. 7

8 insect larvae to the hot inner core of the compost heap. Technical specification of shredder and windrows turner is provided in following table. Particular Details Palm Oil Mill Mill processing capacity 45 TPH Ratio of EFB/ FFB (by weight) 22% Average working hrs/ day 16 hrs Days of operation (days per year) 300 Ratio of POME/FFB 0.45 m 3 /ton FFB processed Windrow Turner Model Backhus Mechanical Turner Machine (15.55) Dimensions 3.490*5.70*3.460 (mm) Rotor Diameter 1.20 mm Motor 6 Cyl, Cummins Turbo Diesel Shredder No of shredding units 04 Model SE/F75 Capacity 8 TPH Motor 55 kw (75hp) Fiber produced mm Power consumption Source of Electricity In the proposed project activity, electricity will be sourced from existing biomass based power plant in palm oil mill. A.4.3 Estimated amount of emission reductions over the chosen crediting period: Estimated amount of emission reductions are given below. Years Estimation of annual emission reductions in tones of CO 2 e** , , , , , , ,586 Total estimated reductions (tonnes of CO 2 e) 193,102 Total number of crediting years 7*3 Annual average of estimated reductions 27,586 over the crediting period (tonnes of CO 2 e) A.4.4. Public funding of the small-scale project activity: 8

9 No Public funding (ODA and/ or Annex I countries) is or will be used in the proposed project activity. A.4.5. Confirmation that the small-scale project activity is not a debundled component of a large scale project activity: According to the Appendix C of the Simplified Modalities and Procedures for Small-Scale CDM project activities A proposed small-scale project activity shall be deemed to be a de-bundled component of a large project activity if there is a registered small-scale CDM project activity or an application to register another small-scale CDM project activity: With the same project participants; In the same project category and technology/measure; and Registered within the previous 2 years; and Whose project boundary is within 1 km of the project boundary of the proposed small-scale activity at the closest point The project activity is not a de-bundled component of a large project activity as there is no small scale CDM project activity or an application registered by Kilang Kelapa Sawit Fortuna Sdn. Bhd. in the same project category and technology in the last two years within 1 km of the project boundary of the proposed small scale project activity. 9

10 SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the small-scale project activity: Following approved Small Scale methodology and tool is applied. Meth. No. Title Reference III. F Avoidance of methane emissions through controlled biological treatment of biomass Version 08/ EB 48 B.2 Justification of the choice of the project category: Applicability of AMS III F: The project activity is in line with applicability conditions of approved methodology AMS III F Version 8; specific features of project and applicability of methodology are discussed below- Applicability Criteria This methodology comprises measures to avoid the emissions of methane to the atmosphere from biomass or other organic matter that would have otherwise been left to decay an-aerobically in a solid waste disposal site (SWDS), or in an animal waste management system (AWMS). In the project activity, controlled biological treatment of biomass is introduced through one, or a combination, of the following measures: (a) Aerobic treatment by composting and proper soil application of the compost; (b) Anaerobic digestion in closed reactors equipped with biogas recovery and combustion/flaring system. Measures are limited to those that result in emission reductions of less than or equal to 60 kt CO2 equivalent annually. This methodology is applicable to the treatment of the organic fraction of municipal solid waste and biomass waste from agricultural or agroindustrial activities including manure. Project activities involving anaerobic digestion and biogas recovery from manure shall apply AMS-III.D or AMS-III.R. This methodology is also applicable for co-treating wastewater and solid biomass waste, where wastewater would otherwise have been treated in Project Status Proposed project activity is co-composting of POME, POME slurry and EFB under aerobic conditions with proper soil application in the palm oil estates. Annual emission reduction from project activity is estimated to be ktco 2e, which is less than 60 kt CO 2 e. Proposed project activity involves the cocomposting of biomass waste from Palm Oil Mill (i.e., agro- industrial activities). The project activity does not involve biogas recovery. Proposed project activity includes the co-treating of POME & POME slurry (wastewater) and EFB (solid biomass) using aerobic co-composting. 10

11 an anaerobic wastewater treatment system without biogas recovery. The wastewater in the project scenario is used as a source of moisture and/or nutrients to the biological treatment process e.g., composting of empty fruit bunches (EFB), a residue from palm oil production, with the addition of palm oil mill effluent (POME) which is the wastewater co-produced from palm oil production. The location and characteristics of the disposal site of the biomass in the baseline condition shall be known, in such a way as to allow the estimation of its methane emissions. Guidance in paragraphs 4, 6 and 7 in AMS-III.E shall be followed in this regard. Project activities for composting of animal manure shall also meet the requirements under paragraphs 1, 2(a) and 2(c) of AMS III.D. Further no bedding material is used in the animal barns or intentionally added to the manure stream in the baseline or project scenario. The following requirement shall be checked ex ante at the beginning of each crediting period in the case of composting of solid waste: Establish that identified landfill(s) can be expected to accommodate the waste to be used for the project activity for the duration of the crediting period; or Establish that it is common practice in the region to dispose off the waste in solid waste disposal site (landfill). The project participants shall clearly define the geographical boundary of the region and document it in the CDM-PDD. In defining the geographical boundary of the region, project participants should take the usual distances for transporting the waste utilized by the project activity into account, i.e., if waste is transported up to 50 km, the region may cover a radius of 50 km around the project activity. In any case, the region should cover a reasonable radius around the project activity that can be justified with reference to the project circumstances but in no case it shall be more than 200 km. Once defined, the region should not be changed during the crediting period(s). In case residual waste from the biological treatment (slurry, compost or products from those treatments) are handled aerobically and submitted to soil application, the proper conditions and procedures (not resulting in methane emissions) In absence of the proposed project activity, POME and POME slurry would have been treated in anaerobic open lagoons i.e., anaerobic wastewater treatment system without biogas recovery system. The location and characteristics of the disposal sites of EFB i.e., biomass, where EFBs would have been disposed off in absence of the project activity are known. In the absence of the project activity, EFBs were disposed of in a dumpsite situated in the plantation area owned and managed by the PP. However, methane emissions from EFB disposal at unmanaged solid waste disposal site is not included in proposed project activity. PP is claiming emission reductions through wastewater (POME and POME slurry) treatment component only. In case of the project activity, the co-composting consists of composting the EFB (the biomass) with the wastewater from the palm oil mill. Since no emission reductions are being claimed for composting of EFB, this condition is not applicable for the project activity. Also, the disposal site of EFB has been excluded from the project boundary. The end product from the biological treatment i.e., compost will be handled aerobically and used for soil application as fertilizers. No methane emission from compost application will be ensured as per the procedures defined in monitoring plan. 11

12 must be ensured. In case residual waste from the biological treatment (slurry, compost or products from those treatments) are stored under anaerobic conditions and/or delivered to a landfill, emissions from the residual waste shall be taken into account and calculated as per the latest version of the Tool to determine methane emissions avoided from disposal of waste at a solid waste disposal site. The end product from the biological treatment i.e., compost will not be stored under anaerobic conditions or delivered to a landfill. Monitoring plan will include the procedures to ensure the aerobic conditions during storage and application of the compost. Summary: Proposed Project activity meets the applicability criteria of approved small scale methodologies AMS III. F Avoidance of methane emissions through controlled biological treatment of biomass. B.3. Description of the project boundary: Project boundary: As per the AMS III.F, the project boundary is the physical, geographical site: Project boundary (a) Where the solid waste would have been disposed and the methane emission occurs in absence of the proposed project activity; Project details Unmanaged dumpsites in the plantation area. However, PP does not claim emission reductions from avoidance of solid waste disposal in dumpsites in the baseline scenario. Hence, this is excluded from the project boundary. (b) In the case of projects co-composting wastewater, where the co-composting wastewater would have been treated anaerobically in the absence of the project activity; (c) Where the treatment of biomass through composting or anaerobic digestion takes place; (d) Where the residual waste from biological treatment or products from those treatments, like compost and slurry, are handled, disposed, submitted to soil application, or treated thermally/mechanically; (e) Where biogas is burned/flared or gainfully used; (f) And the itineraries between them (a, b, c, d and e), where the transportation of waste, wastewater, where applicable manure, compost/slurry/products of treatment or biogas occurs Anaerobic and aerobic open lagoon treatment system in the baseline scenario are included. Composting facility in the project activity is included in the project boundary. Composting and storage facility in the project activity are included in the project boundary. There is no biogas generation in the project activity, hence this condition is not applicable. Itineraries between EFB production site, open lagoons of the baseline scenario, compost and storage facility in the project activity are included. 12

13 Project boundary diagram is given below. Palm Oil Mill EFB Shredder POMESlurry Shredded EFB Composting Unit Compost Fertilizer Unit Biofertilizer Plantation POME Mixing pond POME Excess POME Leachate pond Existing Anaerobic & aerobic ponds Waterways Solid waste dump sites Project boundary Gases and sources included in the project boundary: Gases and Sources included in the project boundary are summarized in following table. Table. Summary of gases and sources included in the project boundary (As per approved CDM methodology AM0039 version 2) 9 : Basel Source Gas Included? Justification CO 2 No CO 2 emissions from biomass decay in unmanaged unmanaged disposal disposal sites due to biogenic nature of biomass are not sites considered. This is conservative. ine Biomass disposed in

14 Project Activity Open lagoons Transportation Auxiliary equipment Co- Composting Process Open lagoons for post treatment Transportation Auxiliary equipment CH 4 No CH 4 emissions from biomass decay in unmanaged disposal sites are not included in the project boundary. This is conservative. N 2 O No Not significant. Excluded for simplification and conservativeness. CO 2 No CO 2 emissions from POME treatment in anaerobic open lagoon due to biogenic nature are not considered. CH 4 Yes CH 4 emissions from POME treatment in anaerobic open lagoons in the baseline scenario. N 2 O No Not significant. Excluded for simplification and conservativeness. CO 2 Yes Emissions from fuel consumption in transportation of EFB from production plant to disposal site CH 4 No Not significant. Excluded for simplification and conservativeness N 2 O No Not significant. Excluded for simplification and conservativeness CO 2 No Emission from Grid Electricity or Fossil Fuel. PP does not claim for emission reductions for such avoidance. Hence, this is excluded. This is conservative. CH 4 No Not significant. Excluded for simplification and conservativeness N 2 O No Not significant. Excluded for simplification and conservativeness CO 2 No CO 2 emissions from composting process are not considered due to biogenic nature of biomass CH 4 Yes CH 4 emissions from anaerobic pockets during composting process N 2 O Yes N 2 O emissions from loss of N 2 O-N during composting process and during land application of the compost CO 2 No CO2 emissions from residual POME treatment in aerobic open lagoon are not considered due to biogenic nature CH 4 Yes CH4 emissions from process wastewater post treatment and reuse N 2 O No Not significant. Excluded for simplicity and conservativeness CO 2 Yes Emissions from fossil fuel consumption in transportation of EFB/ compost to/ from project site CH 4 No Not significant. Excluded for simplicity and conservativeness N 2 O No Not significant. Excluded for simplicity and conservativeness CO 2 Yes Emission from combustion of fossil fuel and/or electricity from grid in the auxiliary equipments or machineries CH 4 No Not significant. Excluded for simplicity and conservativeness 14

15 N 2 O No Not significant. Excluded for simplicity and conservativeness B.4. Description of baseline and its development: Baseline Scenario: Project activity includes three waste streams (POME, POME slurry and EFB) from Palm Oil mill. The baseline scenario is the situation where, in the absence of the project activity, POME, POME slurry are treated anaerobically in a series of ponds & EFB are left to decompose and methane is emitted into the atmosphere in an uncontrolled manner. To be conservative, the proposed project is not claiming methane avoidance from the disposal of EFB in solid waste disposal sites. Baseline scenarios for these waste streams are discussed in following sections. Description of baseline scenario for Palm Oil Mill Effluent (POME) and Palm Oil Mill slurry disposal: In the baseline scenario, POME and POME slurry were being treated in series of anaerobic & aerobic open lagoons system. The COD and BOD of the treated wastewater that is released into the river or used for irrigation purposes after going through a series of open lagoons is able to meet the regulatory discharge limits, hence conforms with the environmental regulations of Malaysia. Details of the ponds are provided in Annex 3. POME treatment in open anaerobic lagoons is the most common POME treatment system in palm oil mills in Malaysia and is consistent with the mandatory laws and regulations of Malaysia. As per the study carried out % of the palm oil mills use open ponds and another 5-10% use open tanks for POME treatment, while the rest use composting and others (Eco-Ideal 2004; Yeoh 2004a). The baseline open lagoons treatment system at the site consists of a cooling pond, four anaerobic ponds (lagoons) and two aerobic ponds. Description of baseline scenario for Empty Fruit Branch (EFB) disposal: EFB primarily in the baseline would be disposed off in solid waste disposal sites located in plantation estate owned by the PP. Also, some amount of EFB in the baseline was being mulched for the palm oil plantations through soil application. Thus in the baseline, methane emissions would have occurred due to anaerobic decay of EFBs in disposal site. Thus continuation of current practice is the most plausible baseline scenario. In the baseline, POME & POME slurry would have been treated in open anaerobic lagoons/ponds before final discharge into a waterway or plantation. In the baseline, the EFBs would have been disposed at unmanaged disposal site or would have been mulched. Data used to determine the baseline emissions: Following data is used for estimation of baseline emissions: 10 B.G. Yeoh (2004) A Technical and Economic Analysis of Heat and Power Generation from Bio-methanation of Palm Oil Mill Effluent - Paper presented in seminar on Electricity Supply Industry in Transition: Issues and Prospect for Asia January 2004; Ma, Ah Ngan. (1999), Management of Palm Oil Industrial Wastes in Malaysia, Paper presented in Seminar on Integrated Waste Management in Sarawak (28-29 July 1999). 15

16 Particular Value Unit Reference Mill Capacity 45 TPH Operational license of the mill Operational days 300 days/annum Assumption Operational hours 16 hrs/day Assumption EFB generation 22% % of FFB processed - POME generation m3/ FFB processed Tech supplier COD POME mg/l Average of test reports from five samples Methane generation potential 0.21 kgch 4 /kg COD AMS III.F MCF ww,treatment AMS III.F Diesel density kg/l Petronas 12 B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered small-scale CDM project activity: Proposed project activity falls under small scale project activity. According to the Attachment A to Appendix B of the simplified modalities and procedures for small-scale CDM project activities, the project is deemed to be additional if it faces at least one of the following barriers: (a) Investment barriers: a financially more viable alternative to the project activity would have led to higher emissions; (b) Technological barriers: a less technologically advanced alternative to the project activity involves lower risks due to the performance uncertainty or low market share of the new technology adopted for the project activity and so would have led to higher emissions; (c) Barrier due to prevailing practice: Barrier due to prevailing practice: prevailing practice or existing regulatory or policy requirements would have led to the implementation of a technology with higher emissions; (d) Other barriers; without the project activity, for another specific reason identified by the project participant, such as institutional barriers or limited information, managerial resources, organizational capacity, financial resources, or capacity to absorb new technologies, emissions would have been higher. PP demonstrates investment barriers in line with the guidelines defined in the Guidelines on the Assessment of Investment Analysis (Ver. 3.0). To conduct the investment analysis, following Sub-steps are applied; Selection of analysis method: The project generates revenue (avoiding purchase of chemical fertilizers due to use of compost). Therefore, PP has chosen benchmark analysis to demonstrate the investment barriers to the proposed project activity. For this purpose, the PP has chosen Project IRR as the financial indicator. Benchmark selection: 11 Includes generation of POME and POME slurry

17 According to paragraph 12 of Guidelines on the Assessment of Investment Analysis (Ver. 3.0) Local commercial lending rates is appropriate benchmark for a project IRR. Therefore PP has selected the Base Lending rate (BLR) of commercial banks as benchmark to compare the project IRR. Benchmark determination: The Malaysian Central Bank releases the Base Lending Rates (BLR) at which the Malaysian commercial banks provide financing to projects. PP has selected the BLR of 2005 i.e., 6.20% 13 as benchmark IRR for proposed project activity. The proposed project will be considered financially attractive if project IRR crosses the selected benchmark, else it would be termed as additional. IRR calculation: Following table includes the data used for Project IRR calculation. Particular Value Unit Mill Capacity 45 TPH Operational hrs 4800 Hrs/annum FFB processed Ton/annum FFB to EFB conversion 22 % Project cost RM Annual Operation & Maintenance 5 % Corporate Tax rate 28 % Inflation Rate ~3 % Depreciation rate 5 % Project life 21 years The Project IRR based on above mentioned assumptions is provided in Table below. All the values were applicable at the time of decision making phase of the project activity, in line with the guidance on investment analysis (EB 51 Annex 58) from the EB of UNFCCC. The project IRR without CDM is below the benchmark making the proposed project activity financially unviable. Additional revenue from CDM would improve the project s return above the required returns and thus helps the project to overcome investment barriers. Project IRR Value Project IRR (without CDM revenue) Negative Project IRR (with CDM) +14.7% Sensitivity Parameters: The purpose of sensitivity analysis is to conclude that financial analysis is robust to reasonable variations in the critical assumptions. For proposed project activity, following key parameters are selected as sensitive parameters to check financial attractiveness. i. Project cost ii. Savings from project iii. Operational and Maintenance cost 13 \ 17

18 Project cost: Increase or decrease in assumed project cost will directly affect project returns. However, it is evident from sensitivity assessment that even 10% reduction in project cost does not make project attractive. The return to the project activity remains financially unviable without the CDM revenues. Sensitivity analysis for project cost Project IRR -10% 0% +10% Project IRR (without CDM revenue) Negative Negative Negative Project IRR (with CDM revenue) 17.2% 14.7% 12.5% Benchmark 6.20% However, chances of a decrease in the project cost are absent as the project proponent has already made all the investments and all costs have already been incurred. A certificate from the CA regarding the project cost shall be submitted to the DOE during validation. Saving from project activity: In the proposed project activity, compost will be used to replace chemical fertilizer and thus results in monetary savings. Either increase in price of compost or production rate of compost will affect the returns from project activity in similar way. However, even +10% change in project activity does not make the project financially viable. Sensitivity analysis for compost price Project IRR -10% 0% +10% Project IRR (without CDM revenue) Negative Negative Negative Project IRR (with CDM revenue) 13.6% 14.7% 15.7% Benchmark 6.20% Chances of a variation in the savings are very low as the project proponent has taken into account the maximum possible production of compost for calculating the IRR of the project activity. Moreover, as seen above, even a 10% increase in the savings does not make the project IRR viable. Annual operational cost: Any change in annual operational cost may have direct impact on returns from the project activity. However, as seen here, a change of -10% in O&M cost is not able to cross the benchmark rate. Sensitivity analysis for annual operational cost Project IRR -10% 0% +10% Project IRR (without CDM revenue) Negative Negative Negative Project IRR (with CDM revenue) 15.9% 14.7% 13.4% Benchmark 6.20% The annual operation costs are expected to increase with time due to many factors (i.e. inflation, increase in maintenance, wear and tear, etc.). Increase in expenses shall lead to lesser savings for the project activity. Hence, chances of a decrease in the annual operational costs are minimal. Conclusion: 18

19 It is evident from above assessment that the proposed project activity is not a financially viable option. However revenue from sell of CERs will affect project s return significantly and makes the project a financially attractive alternative for the project promoter. Hence, it can be concluded that the project activity is additional and would not have taken place in the absence of CDM revenues. Prior CDM consideration According to the paragraph 6 of Guidance on the Demonstration and Assessment of Prior Consideration of CDM (Version 3.0 Annex 22 EB 49) 14, for the project activity with a start date before 2 August 2008 are required to demonstrate that the CDM was seriously considered in the decision to implement the project activity. Such demonstration requires the following elements to be satisfied: (a) The project participant must indicate awareness of the CDM prior to the project activity start date, and that the benefits of the CDM were a decisive factor in the decision to proceed with the project. Evidence to support this would include, inter alia, minutes and/or notes related to the consideration of the decision by the Board of Directors, or equivalent, of the project participant, to undertake the project as a CDM project activity. The start date of the project activity under discussion was 09/08/2006. However, PP had initiated discussion with technology consultant (01/03/2006) and CDM consultant (02/04/2006) before taking decision to proceed with the project, which confirms prior CDM awareness. The company s Board of director discussed the project s financial viability with or without CDM benefits in its Board meeting on 09/05/2006. The Board members concluded that proposed project activity is not financially viable without CDM benefits and the company should take into account CDM benefits and proceed with the project activity. It confirms that CDM revenues were a decisive factor in the decision to implement the project activity. (b) The project participant must indicate, by means of reliable evidence, that continuing and real actions were taken to secure CDM status for the project in parallel with its implementation. Evidence to support this should include, inter alia, contracts with consultants for CDM/PDD/methodology services, Emission Reduction Purchase Agreements or other documentation related to the sale of the potential CERs (including correspondence with multilateral financial institutions or carbon funds), evidence of agreements or negotiations with a DOE for validation services PP had made continuous efforts to secure CDM status for the project in parallel with project s implementation. Please refer table below for detail project chronology. PP had signed agreement with CDM consultant (14/09/2006) soon after project start date. Along with the PDD development, CDM consultant was looking for the potential CER buyer on behalf of PP. PP had organized stakeholder meeting (12/07/2007) to raise the opinion of local stakeholders about the project activity. In the meantime Project Information Note (PIN) was submitted to local DNA, which was approved later on 27/07/2007. PP had signed MoU with CER buyer on 16/10/2007 and the PDD was webhosted for Global Stakeholder process (09/10/07) 15. On expiry of 1 st MoU, PP had signed 2 nd MoU with the CER Buyer on 30/07/

20 Due to some unavoidable circumstances, the composting facility could only be commissioned partially till 13/09/2008 (Project commissioning). Although the PP was putting his best efforts to secure CDM status, the ERPA could not be signed due to market instability. Finally, the CER buyer informed PP about his decision to back-out of the deal on 08/04/2009. PP discussed other alternatives with his CDM consultant to take project further. However, despite PP s best efforts no mutual understanding acceptable to all stakeholders could be reached and PP received no objection certificates from all parties i.e., CER buyer & CDM consultant. PP was determined to secure CDM status; therefore PP reinitiated the validation process and signed agreement with other CDM consultant in October It is evident from above discussion that PP has made real and continuous efforts to secure the CDM status for the project in parallel with its implementation. Table: Project chronology Event Date Reference Proposal from 1/3/2006 Copy of proposal technology consultant Proposal from CDM Consultant 2/4/2006 Copy of agreement Board of Directors 9/5/2006 Copy of MoM meeting Agreement with 5/6/2006 Copy of agreement technology consultant PO order 22/09/2006 Copy of purchase order Agreement with CDM 14/09/2006 Copy of agreement consultant News Paper 4/7/2007 Copy of news paper advertisement Advertisement Stakeholder meeting 12/07/20007 Copy of stakeholder meeting PIN approval by DNA 26/07/2007 Copy of NCCDM approval MoU with Buyer 16/10/2007 Copy of MoU 1st GSP 09/10/07 - UNFCCC Website - 07/11/07 WR05U2HU062H8PJ04RR/view.html 2nd MoU with Buyer 30/07/2008 Copy of MoU Composting Plant 13/08/2008 Copy of Letter Commissioning NoC from CER buyer 31/07/2009 Copy of letter Proposal from 2nd CDM consultant 22/10/2009 Copy of proposal from second CDM consultant Agreement with CDM 22/10/2009 Copy of agreement Consultant EVI Agreement with DoE - BVC Malaysia 2nd GSP Feb-10 29/06/ /07/2010 Copy of agreement V3XIBING3UWR4BJN70IB/view.html 20

21 Further according to the paragraph 8 of Guidance on the Demonstration and Assessment of Prior Consideration of CDM (Version 3.0 Annex 22 EB 49), in validating proposed CDM project activities where: (a) there is less than 2 years of a gap between the documented evidence the DOE shall conclude that continuing and real actions were taken to secure CDM status for the project activity; PP has signed agreement with CDM consultant within one month of placing purchase order. It confirms that continuing and real actions were taken to secure CDM status for the project activity within the limit defined. From project chronology it is confirmed that along with the project implementation, PP has also taken real action to secure CDM status for the proposed project activity. B.6. Emission reductions: B.6.1. Explanation of methodological choices: Baseline Emissions: Methane generation potential of Solid Waste As per paragraph 17 of AMS III F version 8, the baseline scenario is the situation where, in the absence of the project activity, biomass and other organic matter (including manure where applicable) are left to decay within the project boundary and methane is emitted to the atmosphere. The baseline emissions are the amount of methane emitted from the decay of the degradable organic carbon in the biomass solid waste or manure. When wastewater is co-composted, baseline emissions include emissions from wastewater co-composted in the project activity. The yearly Methane Generation Potential for the solid waste is calculated using the first order decay model as described in the latest version of the Tool to determine methane emissions avoided from disposal of waste at a solid waste disposal site. Baseline emissions from the manure composted are calculated as per the procedures of AMS III.D. Baseline emissions shall exclude emissions of methane that would have to be captured, fuelled or flared to comply with national or local safety requirement or legal regulations. BEy = BE CH4,SWDS,y (MD y,reg * GWP_CH4) + (MEP y,ww *GWP_CH 4 ) + BE CH4, manure,y...(1) Where, Parameter Details BE y Baseline emissions in year y (tco 2 e) Yearly methane generation potential of the solid waste composted or an-aerobically digested by the project activity during the years x from the beginning of the project activity (x=1) up to the year y estimated as per the latest version of the Tool to determine methane emissions avoided from disposal of waste at a solid waste BE CH4,SWDS,y disposal site (tco2e). The tool may be used with the factor f=0.0 assuming that no biogas is captured and flared. With the definition of year x as the year since the landfill started receiving wastes, x runs from the first year of landfill operation (x=1) to the year for which emissions are calculated (x=y) Amount of methane that would have to be captured and combusted in the year y to MD y,reg comply with the prevailing regulations (tonne) 21

22 BE CH4, manure,y MEPy,ww GWP_CH 4 Where applicable, baseline emissions from manure composted by the project activities, as per the procedures of AMS-III.D Methane emission potential in the year y of the wastewater co-composted. The value of this term is zero if co-composting of wastewater is not included in the project activity (tonne) GWP for CH 4 (value of 21 is used) Assumptions: i. EFB (i.e, Biomass) would have been dumped at unmanaged solid waste disposal site in the baseline scenario. However, being conservative methane emissions from biomass decay are not considered for emission reduction calculation. Hence, BE CH4, SWDS, y is taken as ZERO. ii. There is no biogas capture or combustion and no prevailing regulation to capture and/or combust methane in the baseline scenario. Therefore MD y,reg is taken as ZERO. iii. Baseline emissions from manure composting is not applicable therefore BE CH4,manure,y is taken ZERO. Methane emission potential in the year y of the wastewater co-composted: As per paragraph 18 of AMS III.F, methane emission potential of co-composted wastewater is estimated as: MEPy,ww =Q y,ww,in * COD y,ww,untreated * B O,ww * MCF ww,treatment * UF b...(2) Where, Parameter Details MEPy,ww Methane emission potential in the year y of the wastewater co-composted. (tonne) Q y,ww,in Volume of wastewater (POME and POME slurry) entering the co-composting facility in the year y (m 3 ) COD y,ww,untreated Chemical oxygen demand of the wastewater entering the co-composting facility in the year y (tonnes/m 3 ) B O,ww Methane producing capacity for the wastewater (IPCC default value of 0.21 kg CH 4 /kg.cod) MCF ww,treatment Methane correction factor for the wastewater treatment system in the baseline scenario (MCF value as per table III.F.1) UF b Model correction factor to account for model uncertainties (0.94) Assumptions: The following assumptions are taken to estimate baseline emissions from wastewater co-composting; i. ii. The average amount of POME generated by FFB processing at the mill is 0.45 m 3 / tffb. iii. Untreated POME volume, Q y,ww estimated as m 3 /y iv. Raw POME COD concentration, COD y,ww,untreated is default value of mg/l v. As per paragraph 19 of AMS III.F, Methane Correction Factor (MCF) value should be taken from table III.F.1. In the baseline scenario, depth of anaerobic open lagoons is more than 2 meters 16. MCF value is taken as 0.8. Project Activity Emissions: 16 Details of anaerobic open lagoons are provided in Annex 3. 22

23 As per paragraph 20 of AMS III.F, project activity emissions consist of: (a) CO 2 emissions due to incremental transportation distances; (b) CO 2 emissions from electricity and/or fossil fuel consumption by the project activity facilities; (c) In case of anaerobic digestion: methane emissions from physical leakages of the anaerobic digester; (d) In case of composting: methane emissions during composting process; (e) In case of composting (including co-composting of wastewater): methane emissions from runoff water; (f) In case the residual waste from the biological treatment (slurry, compost or products from those treatments) are stored under anaerobic conditions and/or delivered to a landfill: the methane emissions from the disposal/storage of these residual waste/products PE y = PE y,transp +PE y,power + PE y,phy leakage + PE y,compost + PE y, runoff + PE y, res waste...(3) Where, Parameter PE y PE y,transp PE y,power PE y,phy leakage PE y,compost PE y, runoff PE y, res waste Details Project emissions in the year y CO 2 emissions due to incremental transportation distances CO 2 emissions from electricity and/or fossil fuel consumption by the project activity facilities Methane emissions from physical leakages of the anaerobic digester Methane emissions during composting process Methane emissions from runoff water Methane emissions from the disposal/storage of these residual waste/products Project emissions due to incremental transportation distances (PE y, transp): As per Paragraph 21 of AMS III.H, project emissions due to incremental transport distances (PE y,transp ) are calculated based on the incremental distances between: (i) The collection points of biomass and the compost treatment site as compared to the baseline solid waste disposal site; (ii) When applicable, the collection points of wastewater and treatment site as compared to baseline wastewater treatment site; (iii) Treatment sites and the sites for soil application, landfilling and further treatment of the residual waste/products. PE y, transp = (Q y /CT y ) * DAF w * EF CO2 + (Q y, treatment, i / CT y, treatment, i ) * DAF treatment,i * EF CO2...(4) Where, Parameter PE y,transp Q y CT y DAF w EF CO2 I Q y, treatment, i Details CO 2 emissions due to incremental transportation distances Quantity of wastewater co-treated in the year y (tonnes) Average truck capacity for transportation (tonnes/truck) Average incremental distance for raw solid waste/manure and/or wastewater transportation (km/truck) CO2 emission factor from fuel use due to transportation (kgco 2 /km, IPCC default values or local values may be used) Type of residual waste/products and or compost Quantity of residual waste/products and/or compost i produced in year y (tonnes) 23